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Tuesday, March 16, 2010

Comment of the Day: "Are companies unfairly working the system Firing and rehiring people to minimize costs"?

Matt's comment on our recent article:$66,000,000,000 (billion) for Additional Jobless Unemployment benefits Passed by Senate

Matt said:  "First off, it's a loaded question. We need both- extension of benefits for the short term and incentive to create jobs in the longer term.

Tea Party nutbars whine and cry about big government, socialism, and overspending, yet they freely ignore things they take for granted like Medicare, Social Security, and the five day work week. All of those are products of the "big government" they fear.

Then there's also the complete silence from these fools when our previous administration spent like a lottery winner, got us embroiled in two wars (only one of which was even remotely justified), and made government far bigger than it had been prior to his first term. Where were the cries of "smaller government" then?

I'm not saying don't protest big government, socialism, social programs, or anything like that. I just despise the "yeah, but then it was _our_ guy doing it, so it was OK" double standard I keep hearing from the wingnuts, who are not conservatives in any way except maybe religion.

But enough about frightened loonies. Here's something we can do to increase companies' incentives to hire and keep people: First off, extend unemployment benefits, perhaps adding a stipulation that the extension borrows against unemployment drawn upon after 2012. This way people get relief now but will have a harder time abusing the extension.

Second, give companies tax breaks for hiring people- but hold up, we have to be specific. Tax breaks to companies, improperly handled, are the most egregious form of welfare in the country. We need to make sure they actually encourage long term job creation.

So we give them credits for each new employee hired BUT they are granted on a 30 day basis. Every 30 days, if an employee hired after a given date is still there, they get a tax break. If the employee is let go, they lose it. A provision that denies credits to employers that flip people to pad quarterly earnings statements (this happens at Dell every 90 days, that is one reason they are always hiring- that and the ridiculously stressful environment) would also be necessary.

Yes, Dell works the system, at least locally- they lay off a ton of people every 90 days so they can come in under budget to make the earning statements look good. Then they (re)hire a bunch of people once those are done for 90 more days. I am not sure if there is any new hire tax credit like there was in the early days of their Nashville campus, but if there is, they are probably getting extra tax breaks for this too.

I'd also consider a break that would discourage frivolous layoffs (like those above)- keep your employees, pay fewer in taxes that year.

Of course, this is an oversimplification of the problem and solution, and it would require some work to make it effective. The gist of it is to reward employers for hiring or retaining employees and end breaks for companies working the system by using revolving door hiring, working employees 39.5 hours a week to deny them benefits, and other such greed-driven measures.

Plenty of companies still doing well even now are able to treat their employees fairly and still turn a profit. I don't see why we can't use corporate tax breaks in a way that actually benefits the workers AND the employers.

But hey, I'm no economist..."



note: Interns Over 40 does not agress or disagree with the opinion of its readers in "Comment of the Day". We welcome you comments.








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5 Post a Comment :

JuneBug said...

Thanks for this interesting article!

Anonymous said...

Right on and well said. It's always amazing that the millions of us workers are called special interests while businesses - certainly fewer in number and with more limited focus - aren't. It's also time that government subsidies of any type end for companies that send jobs overseas. Part of the problem we're in now, and a huge part of what we'll be dealing with in the future, is that companies have been allowed to send jobs to other companies. I love some foreign countries but it's time keep Americans employed and deal with companies that work against that.

Cadboss said...

I like the break down of the extension money and of the tax credit since it would "seem" to make the companies more accountable. If only that were possible. If Dell can get away with their game of hire/rehire, how many more companies would find ways to beat the system.

It's comical that many us, regardless of our political slant, always seem to point the finger at the "other guy". I have been trying very hard to view the present situation in the larger view and blame no one in particular, but blame all. If, and I emphasize if, there were enough honest people to take on the tax credit idea fairly, I think it would work. Therein is the devil in the details.

Anonymous said...

Right on and well said. It's always amazing that the millions of us workers are called special interests while businesses - certainly fewer in number and with more limited focus - aren't. It's also time that government subsidies of any type end for companies that send jobs overseas. Part of the problem we're in now, and a huge part of what we'll be dealing with in the future, is that companies have been allowed to send jobs to other companies. I love some foreign countries but it's time keep Americans employed and deal with companies that work against that.

Dinesh Kumar Sinha said...

Rationalization/reduction in manpower I can understand helps in curbing the manpoer cost. I do not know how firing and then hiring again can help in minimizing the cost.There are two cost involved-one compensation when you fire an employee and then hiring cost. Poorly manage company do indulge in such activity where recruitment is weak or manpower planning is weak. Efficiently managed compnay do not need such measures. In India a reputed US based company wanted to reduce manpower cost and so they asked employee to accept 1 % salary cut and no yearly increment or 5 % strength reduction.Employee collectively accepted salary cut. This happened in 2009. In 2010 business improvement, sales volume picked up and employee got increment ranging from 10 to 20%.
It is definitely unfair and condemed practice to fire existing productive emplyee and hire again employee whose performance can be measured in future only.

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